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NEWS ANALYSIS : Some Say Penalty Process Impedes Trade Talks : Markets: Ex-negotiator calls Super 301 a provocation to targeted nations. But others see it as just what is needed to spur Japanese concessions.

March 04, 1994|PATRICK LEE | TIMES STAFF WRITER

The only other time the American government tried to get tough with its trading partners through the so-called Super 301 provision of the U.S. trade law, the effort backfired and made talks even harder, a George Bush Administration negotiator said Thursday.

That may contain a lesson for the Clinton Administration, which is renewing the controversial provision that sets in motion a lengthy process that ultimately could result in sanctions against nations that do not open their markets to U.S. goods.

S. Linn Williams, a Washington lawyer and former deputy trade representative, said that, when the provision was first invoked in 1989 against Japan, India and Brazil, it did not help.

"The government has all of the tools necessary to investigate trade practices and remedy them without Super 301," he said. "What it does is add a poke in the eye, which in 1989 caused a delay in the negotiating process."

Trade retaliation "is a club more effective when it's not used than when it is," noted Michael Smith, former deputy trade representative in the Ronald Reagan and Bush administrations.

Not everyone agrees. Some experts say Super 301 is just what is needed to spur the Japanese into concessions.

Clyde Prestowitz, president of the Economic Strategy Institute in Washington and former counsel to the secretary of commerce under Reagan, argues that Super 301 succeeded in 1989 and will do so again in 1994.

"I think it provides an impetus, creates some pressure for negotiation," he said. "Japan may scream about it and others may pound their chests . . . but that's largely letting off steam."

If the provision does lead to U.S. trade sanctions against Japan, it could be the opening round of a trade war that would be devastating to two nations whose economies are closely intertwined, analysts said. Sanctions, which are at least a year away, would likely be in the form of high tariffs or other barriers on consumer products made in Japan.

When the Bush Administration invoked the provision in 1989, it never resulted in sanctions. Negotiations ended successfully within 12 months, said Williams, who was the point man in talks with Japan.

At the time, Williams said, he favored the provision as a way to gain leverage in negotiations to open Japanese markets to U.S. satellites, supercomputers and wood products, to win intellectual property protections in Brazil and to open Indian markets to U.S. insurance firms.

In retrospect, he said he believes, invoking the provision was unduly provocative. The targeted nations protested at having to conduct negotiations under duress and Williams said he expended a lot of effort getting around those protests.

"As a tactical matter, a negotiating matter, it was a waste of time," he said.

In making the announcement Thursday, U.S. Trade Representative Mickey Kantor carefully avoided mention of any specific nations or trading practices to be targeted, saying a final list will be issued Sept. 30.

Some observers said they believe that the delay is meant to give the United States and Japan time to work out their differences before Super 301 is actually set into motion.

But others said they believe that Japan's reaction may be so forceful that it will only harden its position in the meantime.

"All it adds is rhetoric and a deadline," Williams said. "It's seen as deliberately provocative in Japan and therefore will politicize and irritate a negotiating process that now requires a degree of calmness and pragmatism."

The action could also create problems for the United States under the General Agreement on Tariffs and Trade, the worldwide trading regime that prohibits unilateral trade actions by member nations.

"This piece of legislation is not well liked . . . by any other country in the world. . . . The danger of Super 301 is it leaves the United States open to charges of unilateralism," said Smith, who is now president of SJS Advanced Strategies, a trade consulting firm in Washington.

Paula Stern, a senior fellow at the Progressive Policy Institute in Washington and former chairwoman of the U.S. International Trade Commission, said it is hard to say whether the provision will help or hurt.

On the one hand, the provision "is part of a war of nerves . . . part of the effort to ratchet up the pressure on Japan for change," she said.

On the other hand, the confrontational provision could stall reformist moves within Japan to deregulate the economy and make it more open to imports. "I don't think (Super 301) will necessarily advance Japan's initiatives," she said.

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